part 1.international accounting (IASB) Flashcards
IASCF (was renamed IFRS
is the parent of IASB
objectives of the IFRS
- to develop a single set of financial reporting standards used worldwide
- to take account of, as appropriate, the needs of a range of sizes, and types of entities in diverse economic settings
IASB
is like FASB
IASB has no enforcing power
IOSCO
is the international standard setter for securities markets
IFRS
- oversees
- review effectiveness
- finance IASB
- appoints members to IASB
- parent of the IASB
- not for profit private sector organization
IASB
establishes IFRS
IFRS interpretation committee
similar to FASB emerging issues task force
IFRS advisory council
advises the IASB
IFRS
are more principles based (objectives oriented)
small and medium sized entities
one single standard for companies that are not public traded
IFRS standard setting process
research discussion paper proposal exposure draft published IFRS post-implementation review
convergence agreement between FASB and IASB
- norwalk agreement in 2002 formalized the commitment to covergence between FASB and IASB
- there are still differences
- SEC eliminated the requirement to reconcile from international GAAP to US GAAP in 2007 making it easier for foreign co to list on US exchanges
first time adoption of IFRS
- the first reporting date: is the year end date for the period for which IFRS is first applied
- transition date: is the ongoing date of the earliest period for which full comparative financial statement under IFRS are presented.
IFRS
upon adoption of IFRS the entity must present reconciliations of US GAAP to IFRS to explain the impact of the adoption on equity and comprehensive income
mandatory exceptions to the retrospective application of IFRS
. derecognition of financial assets and liabilities
. hedge accounting
. assets held for sale and discounted operations
. certain aspects of accounting for non-controlling interest
use of certain estimates
IASB framework
is similar to FASB
IFRS conceptual framework
is a point of reference
IFRS objective
to provide f/s that present a true and fair view of the entities performance
IFRS primary characteristics
- faithful representation:
. completeness
. neutrality
. free from error - relevance
. predictive value
. confirmatory value
. materiality
IASB
has 2 assumptions:
. accrual method is used
. the entity is a going concern
IFRS elements
assets liabilities equity income expenses
IFRS elements are included in f/s
- if it is probable that a future economic benefit associated with the item will flow to or from the entity
- the item has a cost or value that can be measured with reliability
IASB income
includes revenue and gains.
IASB expenses
includes expenses and losses
IASB
defines income and expenses in terms of assets and liabilities
IFRS
has not concept comparable to other comprehensive basis of accounting and personal f/s
IFRS
has standard for small and medium sized entities
who needs or uses IFRS for small medium entities
- any entity that does not have public accountability:
. securities not publicly traded
. not a financial institution - and is required or chooses to produce general purpose f/s
. general purpose f/s presents fairly financial position, results of operations and cash flows
who are the users of small medium entities f/s
. lenders, vendors, credit rating agencies
. customers, family investors
. short term cash flows, liquidity, solvency
IFRS for small medium entities
are not OCBOA
IFRS for small medium entities
are GAAP for qualifying companies
entities that cannot use IFRS for small medium entities
. entities that issue instruments in a public market
. entities that hold assets in a fiduciary capacity: banks, insurance companies, mutual funds, not for profits and governmental entities
U.S. companies
can use IFRS even if they don’t engage in international transactions
IFRS for small medium entities
does not permit LIFO cost in valuing inventory
U.S. companies
can use IFRS as an alternative to using OCBOA
IFRS for small medium entities major characteristics
. disclosures are simplified in a number of areas including pensions, leases, and financial instruments
. LIFO is prohibited
. goodwill and indefinite life intangible assets amortize over a period not exceeding 10 years
. depreciation is based on a components approach
. a simplified temporary difference approach to income tax accounting
. reversal of impairement charges, if certain criteria are met is allowed
. accounting for financial assets and liabilities makes greater use of cost
. no disclosures for earnings per share and segment disclosures
various types of GAAP which can be used by a U.S, company
. u.s. GAAP
. U.S. OCOBOA
. IFRS
. IFRS for small medium size entities
IFRS general purpose f/s
. comparative periods are required
. changes in owner’s equity must be presented in a separate statement
IFRS income statements
. no requirements on reporting special items
. dividends per share require disclosure
IFRS statement of comprehensive income
. permits re evaluation of PPE through OCI (reclasification of PPE revaluation must also flow through OCI not NI)
. per share measures are not prohibited
IFRS statement of cash flows
. interest paid - operating or financing
. interest received - operating or financing
. taxes paid - operating - in financing or investing if specifically identified with an item
. dividends received - operating or investing
. dividends paid - operating or financing
cash and cash equivalents - may include bank overdrafts
IFRS f/s includes
. statement of financial position ( balance sheet) . statement of comprehensive income . statement of changes in equity . statement of cash flows . notes
IFRS requires firms to analyze expenses either by:
- function: focus on the activity to which the expense relates: exp: cost of sales, distribution costs
- nature: focuses on the type of expenses. exp: changes in inventory of finished goods and work in progress, employee benefit expense, depreciation and amortization expense
